Back in March, Ofcom announced plans to introduce a new automatic broadband compensation system which would award customers set amounts of compensation where they experience delayed repair following loss of service, delays with start of new service or missed engineer appointments. We originally stated that the proposed claim amounts were disproportionately high when you consider most residential broadband services cost around £20 a month and Ofcom were proposing claims of £10 per day for an outage.

Since then the proposals have entered a consultation period and this week the Citizens Advice bureau has slammed ISPs for their counter proposal of slightly reduced claim amounts, calculating that customers could be ‘short changed’ by up to 32% when compared to Ofcom’s original proposal.

Gillian Guy, Head of Citizens Advice, said: “A watered down compensation scheme would short-change customers by millions of pounds. Thousands of people each year seek our help when their provider fails to repair or set up their broadband. Some people are left without a working internet connection for weeks despite numerous calls to their provider or no-shows from engineers.

Broadband is now an essential service, with households relying on it for everyday activities, so a lack of a working service can make day-to-day tasks more difficult.

The regulator must hold its ground and introduce a compulsory automatic compensation scheme that clearly lays out how much consumers are entitled to when they get poor service, with the amount providers have to pay reflecting as closely as possible the detriment faced by consumers.”

Whilst we agree that broadband is becoming an increasingly essential service we think a compromise needs to be brokered here. At the end of the day, whilst Ofcom have a duty to protect customers rights they also have a duty to ensure a fair and proportionate system is implemented for industry and the current rates seem unfairly high, especially when you also consider the costs of implementing and updating new admin and billing systems to actually deliver these new requirements.

The latest proposals from ISPs BT, Sky Broadband and Virgin Media are reportedly as follows, although ISPA suggests these may not be the latest options being discussed and that negotiations are very much still in progress.

£20 for a missed appointment slot or cancellation with less than 24 hours notice

Ofcom payment

£10 per calendar day beyond two working days after the provider becomes aware of the loss

£6 per calendar day beyond the date that the provider has committed to in a written form

£30 for a missed appointment slot or cancellation with less than 24 hours notice

Responding to the Citizens Advice bureau’s comments ISPA stated: “The vast majority of UK broadband customers receive a very good service, but when things go wrong, the industry agrees that customers are entitled to compensation. Internet service providers fully support the principle of automatic compensation, but we do not believe that Ofcom’s suggested approach fully recognises the dynamics and complexities of the UK broadband market – the suggested compensation levels are out of proportion compared to the generally low prices that consumers pay in the UK and risk diverting resources away from rolling out faster connections throughout the country.

“The industry is currently engaging with Ofcom to determine the best level of compensation and Citizen Advice’s research is based on figures that are not any longer up to date. The alternative voluntary approach that has been suggested would not only provide consumers an automatic right to compensation more in line with the overall cost of broadband services but could also be implemented in a much swifter way. A key aim of any automatic compensation policy should ultimately be to minimise disruption to consumer’s services. We need to strike the right balance between helping providers to address the discrepancies in the market and allowing them to continuously invest in their networks and maintain competitive prices for their products.” Andrew Glover, Chair of ISPA

ISPA clearly echoes the concerns that we raised in our previous article on this subject, published back in March. We argued that not only are the current amounts disproportionate, but they will inevitably lead to price increases for consumers as ISPs pass on the increasing costs to their customers. We also highlighted the problems the wholesale market could face with these proposals, such as who is to blame and who pays out? Reseller, wholesaler, carrier? For example, if a customer buys broadband from reseller A, who buys the connection from Entanet, who delivers that connection via Openreach – who miss the appointment or don’t fix the fault quickly enough, then who pays the customer the compensation upfront? Reseller A most likely, but they would then have to claim that back up the channel – a potentially lengthy and costly exercise for smaller ISPs, which could significantly affect cash flow. Something for Ofcom and industry to consider as part of the consultation process!

An automatic broadband compensation policy is now inevitable and in principle, is a worthwhile system to encourage providers to ‘do better’ and ensure customers are protected. But, that said, serious consideration needs to be given to how this will work in practice to ensure smaller ISPs aren’t negatively impacted by the failings of larger carriers.

Additionally, it’s important to reiterate the need to set realistic ‘expectations’ to customers from the start. At the end of the day, broadband is a contended service that will inevitably break from time to time and need fixing, if that’s not acceptable to the user they should potentially consider higher end connectivity options and their providers should be clearly outlining the limitations of broadband from the start.

A clear compromise undoubtedly needs to be reached between Ofcom’s original proposals and industry’s suggestions, ideally with input from all sides of the argument taken into consideration. We are sure through ongoing consultation a suitable solution can be found that will satisfy both sides and we expect to hear more from Ofcom by the end of the year.

Have your say!

Do you agree with the Citizens Advice that ISPs are trying to ‘water-down’ the proposals from Ofcom? Or do you think the original proposals were too tough? Is a compromise possible or do you think Ofcom will stamp it’s authority? Let us know your thoughts with a comment below.